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The Good Old Days of Global Poverty

Noah Smith has a piece in the Atlantic in which he tries to revitalize the anti-WTO Seattle protests. We were wrong to mock them, he says. They were “mostly right”! And “on nearly every count”!

All right, I’ll bite. How, exactly, were they right?

His damning evidence against globalization starts with those dastardly “cheap imports,” which supposedly put Americans out of work. He acknowledges that such imports lower prices for consumers, but says those benefits are “spread very thinly.”

There are a lot of ways to refute this argument. I’m going to focus on two.

First, regardless of whether the benefits of low prices are spread thinly, such benefits outweigh any lost jobs arising from foreign competition. That is to say, the benefits of free trade outweigh the costs. Just be clear, this isn’t controversial, and is not contested by the economists he cites. Furthermore, the impact of Chinese and other imports on U.S. workers isn’t really all that great, and imports actually support many U.S. jobs. So, overall, his argument in this respect is a bit underwhelming. Oh, and by the way, if it’s poor Americans you are worried about, they are the ones who benefit most from trade with China.

Second, there is a larger point. Smith wants to present the issue as whether free trade takes jobs from the middle-class in order to give benefits to consumers and the rich. But that’s not the right way to think about things. The better way to understand the situation is the following: Protectionism takes a lot of money from everyone, in order to give concentrated benefits to a small group of politically connected interest groups. This is the kind of policy that is usually condemned by both the left and right. In the case of the trade debate, however, some well-respected opinion leaders seem OK with such policies. Why is that? My best guess is that it taps into an emotional “us versus them” worldview. It isn’t really about economics at all. It’s about patriotism and nationalism. “They” are bad. “We” are good. So let’s punish them, even if in doing so we are really punishing us.

Smith makes several other points: imports can be unsafe, free trade leads to environmental destruction, globalization is bad for poor workers. On the last two, Smith successfully refutes his own arguments, so I don’t need to do any more work here. As for imports being unsafe, just to be clear, WTO rules allow governments to regulate imported and domestic products for safety and health. Smith is free to argue that the U.S. government does a bad job regulating food and product safety. But that’s not the WTO’s fault.

Now, perhaps the Seattle protesters’ real beef was not with the WTO, but with globalization itself. They would rather live in a world where China had not experienced industrialization and rising living standards. In other words, a world where Chinese people are much poorer. But I don’t think the Chinese people want to live in that world, and neither do I. And it doesn’t seem that Smith does either, as he says:

The industrialization of China and (to a lesser degree) India has been the biggest and most effective anti-poverty program the world has ever seen. Capitalism has its flaws, but it works.

It sounds to me like his real conclusion here is that the protesters were, in fact, wrong!

So what is his complaint about the WTO and globalization exactly? He says:

… a WTO-led globalization could have been implemented a lot better.

Could trade rules be implemented better? Sure. But couldn’t everything? That’s not much of a critique. In the end, it turns out he doesn’t have any specific suggestions or proposals, just general angst. Which kind of reminds me of the Seattle protests.